Wood processing industry
Overview
The wood/furniture industry has traditionally played an important role in the Economy of Serbia. Since the end of the Second World War, Serbia, a country rich of abundant local raw materials, has always maintained a positive trade balance. The country is still rich in remarkable natural resources representing the main reason for its ongoing competitive wood/furniture industry. In fact the forest reserves of the country are estimated to be worth about 235 million cubic metres while woods and forests actually cover approximately 27% of the Serbian Territory which is equal to about two million hectares. The most important areas are the plains in the autonomous province of Vojvodina and the mountain regions in Central Serbia whose climate conditions are respectively very favourable to the growth of poplar and the oak and to hardwood and beech. 47% of the Serbian forests are state owned and controlled by the two major state companies of “Srbijasume” and “Vojvodinasume” respectively managing 85% and 7.5% of the public forest reserves in the country. Private forests make up for the remaining 53% of the country’s forest area which is predominantly split into many small-size land lots (0.5 hectares in average). Large private forestry holdings are just a few but hold a considerable potential for further growth and development. These companies are well-known suppliers of high quality hard wood and a predominant solid wood used in the local furniture production. Activities carried in private forests are subject to the supervision of Srbijasume and Vojvodinasume.
Strengths
In Serbia the production of sawed unrefined timber (boarding) originating from hardwood appears to be prevalent in the Wood Industry. Beech wood accounts for the majority of sawed timber and covers 70% of the total production. 8.5% of the boarding and planking production is obtained out of oak while 11.5% is made out of poplar. At present, thanks to the significant price benefit, timber is also made of fruit trees such as walnuts and cherries. Serbia also produces sawed unrefined timber (boarding) out of softwood mainly obtained from common spruce, fir trees and pine trees available in the country only in limited quantity (9% of total country’s forests). The production of this type of boarding is mainly managed by state-owned companies and is hardly expandable to larger industrial scales due to insufficient financial means and the difficult procurement of raw materials. In Serbia great development is taking place in the field of veneered panels. Poplar is the main timber wood used for veneering products and covers nearly 85% of the total production. However, beech is also reaching significant volumes in veneering. Timber for plywood production is another important Serbian resource. The very large local reserves represent the only source of procurement. In 2006 the annual production of plywood lumber was at 190,000 cubic metres out of which 90% was poplar, 5.4% was beech and 3.1% was oak. The majority of plywood is exported to countries such as Italy, Macedonia and Germany.
In addition, Serbia is a producer of particle-board required by the furniture industry. In fact huge quantities of rejects suitable for particle board production are available in the country from the production of wood carvings and from the forests. Nevertheless Serbia with about 16 cubic metres of material per inhabitant is one of the last European countries in consumption of particle board. As for furniture industry, Serbia is a manufacturer of numerous types of different furniture from bedrooms to living rooms and from kitchens to office furniture. Bedroom furniture appears to be a remarkable product for the hotel sector where Serbian suppliers are well-known and appreciated both locally and abroad. This is especially true for the Russian Federation where the Serbian furniture dealers have created joint ventures with local distributors in order to refurbish hotel and schools, etc. Finally, Serbia has an outstanding tradition for producing wooden doors and windows. This sector counts 275 active companies partially exporting to Russia and Europe and partially selling to the domestic market. Oak is mainly used in this production of wooden doors though fir and common spruce are also used in a significant quantity. Wooden doors and windows production has further increased thanks to the consistent growth of construction business over the last few years.
Opportunities
The foregoing short outline shows that Serbia has the potential for becoming a preferred target of foreign investments in the wood and furniture sector. Additionally to this specific potential one should account the following benefits offered by the country in general. There are over two million employees in Serbia and one third works in production sectors. The wood processing and furniture industry includes 2,365 companies, 96% of which are privately owned and mainly located in the central areas of Serbia. The majority of these companies deal in timber (1,491) and furniture (402). This sector contributes to the Serbian Gross Domestic Product (GDP) by 1.24% and represents 3.95% of total industrial production with an ongoing positive growth trend over the last few years.
Serbia ’s long-term experience has fostered a number of highly skilled, qualified workers who are the life of this sector. In the country there are twenty-two technical high schools for wood carving and wood working plus a dedicated faculty of forestry at the University of Belgrade. In the furniture industry 10% of workers have a post-graduate qualification or a university degree. Another important factor is the cost of workmanship that is one of lowest in the Balkan regions. The average monthly wage before taxes in this sector is no more than 350 Euros for workers, 400 Euros for skilled workers and 500 Euros for supervisors. If on one side the low labour cost is out of doubt a very attractive reason for foreign investors to do business in Serbia or anyway to collaborate with local parties, on the other side it is one of the reasons together with obsolete machineries why production output is still rather low. Despite the difficulties of the last few years, small companies have started to update parts of their production equipment and especially medium-large companies who introduced CNC machinery and technical software as CAD and CAM. Traditionally, the demand in the local market for wood and wooden products is high and is still consistently growing further to recent economical developments, namely the flow of foreign investments allocated after the Serbian transition and privatization process started in 2000. Serbian transition and privatization process brought forth a number of interesting opportunities for foreign investors especially in the privatization field. Foreign investments in this sector are still limited and it has been forecasted that the privatization of some sectors such as the production of multi-layer particle boards, particle boards and plywood panels will soon be completed.
